Ex-Keystone Execs Won't Face Charges

Published 8:00 pm, Thursday, January 31, 2002

Associated Press Writer

A federal judge has thrown out four of the dozens of criminal convictions against two former executives of the failed First National Bank of Keystone.

U.S. District Judge David Faber entered an order Friday that voided four embezzlement convictions against Terry Church and Billie Jean Cherry, agreeing with defense lawyers that the indictment that set out the charges was "fatally flawed."

Church, 48, had been executive vice president of the bank, and Cherry, 77, was chairwoman of the bank. Federal regulators closed FNB-Keystone on Sept. 1, 1999, saying they could not account for $515 million of the bank's reported $1.1 billion in assets.

Church and Cherry were convicted in October 2000 on one conspiracy charge and four counts each of embezzlement and mail fraud. Cherry also was convicted of an additional 16 counts of money laundering.

No sentencing date has been set on those convictions. However, Church is already serving a sentence of four years, nine months for her April 2000 conviction on charges of obstructing federal bank examiners by burying bank records in a pit on her McDowell County farm.

Prosecutors announced this week they had filed a third set of charges against Church, accusing her of one count each of bank fraud and conspiracy to commit money laundering. Those charges were outlined in an information, an alternative to an indictment that usually indicates a defendant has agreed to plead guilty, avoiding a trial.

Church's lawyer, federal public defender Lou Newberger, raised the issue of the flawed indictment after prosecutors had completed their case against Church and Cherry. Faber reserved ruling on the motion to dismiss the charges and allowed the trial to proceed; a jury returned a verdict of guilty on all counts against both defendants.

On Friday, Faber agreed that the indictment was "fatally flawed" because it did not include an allegation that the defendants acted with the "intent to injure or defraud the bank."

"Based on its own filings … the United States agrees that the 'intent to injure or defraud' is an essential element of embezzlement and willful misapplication of bank funds," Faber wrote.

"When the challenge is raised in a timely manner, the absence of an essential element is fatal and the indictment cannot support a conviction," the judge wrote.

Defense lawyers also argued that a fifth count, alleging mail fraud, also should be dismissed because the prosecutors' evidence was insufficient. Faber denied that request.

While the court has thrown out four of the women's convictions, court officers indicated the ruling is unlikely to make much difference in the amount of time each of the women has to spend in prison. Federal sentences are determined under a complex set of guidelines that take into account the defendant's cooperation, acceptance of responsibility and prior criminal record, among other criteria.

Because trial was already under way and prosecutors had completed their case before the flawed indictment was raised, the women will not be retried on those counts.